Bob Lutz sounded the alarm before, during and after Congress passed new Corporate Average Fuel Economy (CAFE) standards. The cost of compliance will add thousands to the prices of new cars and trucks! Investor's Business Daily (via CNNMoney) reckons he's right. They predict that the cost of satisfying the regulators will drive-up the price of new vehicles by an average of $6K or 21.4 percent. And that means unintended consequences. "The higher prices of cars will encourage consumers to keep their older, dirtier but cheaper vehicles for much longer. So the actual benefits will be less than forecast." The paper's eds pronounce Maximum Bob a presumptive prognosticator. "The new CAFE standards, as Lutz suggests, amount to a tax– a rather narrow and inefficient one that will neither reduce our reliance on foreign oil nor curb global warming." Bob Lutz, GM's canary in a coal mine. Of course, that doesn't actually change anything…
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Makes sense as Lutz’s company has pushed off making these improvements for so long versus the Japanese Big 2 have been working these improvements and spreading out the costs over time. This is the cold hard reality of severely procrastinating about making your fleet more fuel efficient as GM didn’t think in the long run but wanted the short term profits from the SUV craze. I’m sorry but this is what the market will do to companies that no longer innovate but try to stay true to outdated business models. Kinda like Lutz…a geriatric stuck in the past (quite common) trying to run a company for the future.
How much does it cost to build a Civic del Sol?
Do you want that with or without the federal crash protection standards?
Maximum Bob and CNN Money can add this to a long list of things that were going to kill Detroit… seat belts, air bags, smog controls…
Every mandate and regulation from the Feds has met cries that it will drive up the cost of a car by some ridiculous value.
But… in the final analysis, none of those things hurt GM as much as the Citation, Olds diesel, Vega, Cimarron, leaky intake manifolds or crap gaskets did.
“The new CAFE standards, as Lutz suggests, amount to a tax– a rather narrow and inefficient one that will neither reduce our reliance on foreign oil nor curb global warming.”
Hey, that sounds exactly what every economist ever has been saying since such absurdist regulations have existed! It’s just like a tax, except that the $6k doesn’t get captured as tax revenue which can be used to lower other taxes or offset emissions elsewhere. If only we had a way to efficiently price emissions…which brought their social cost in line with their private cost…some kind of…tax perhaps?
Robert Schwartz:
Did you mean CRX HF?
There’s an easy way to not pay the “tax” – don’t buy a Yukahoe Hybrid or other oversize vehicle that requires the $6K of engineering to bring it up to snuff. GM is supposed to be coming up with a line of premium small cars, right?
I’m reminded of the mix of vehicles in the early-mid 1980’s, before the SUV boom – lots of small boxy [K-]cars & anemic engines – the ballyhooed 1982 Ford Mustang GT had what, 158bhp? We’re obviously not going back there again, but some belt-tightening can and will occur. Our household will be in the market again shortly, and getting a small car that averages >30mpg will be one of the requirements, along with ESC and the 6+ airbags.
So let me get this straight. You have folks who are unwilling to hand one red cent over to GM because it is a company that is poorly managed and in the opinion of many delivers substandard products, yet you’ll willingly deliver more of your hard earned money to a government that is poorly run and delivers substandard policies and legislation?
I really don’t understand you people.
“So let me get this straight. You have folks who are unwilling to hand one red cent over to GM because it is a company that is poorly managed and in the opinion of many delivers substandard products, yet you’ll willingly deliver more of your hard earned money to a government that is poorly run and delivers substandard policies and legislation?
I really don’t understand you people.”
See, i would be more happy to hand over the money to GM, if I owned a part of GM. since I don’t, I’d rather hand it over to the gummint, since I own a part of the gummint.
See, i would be more happy to hand over the money to GM, if I owned a part of GM. since I don’t, I’d rather hand it over to the gummint, since I own a part of the gummint.
If the only reason you’re willing to let the government dig into your pockets is because you’re a ‘shareholder’, that’s a bad reason.
Thats funny but Toyota’s cost toward making it’s cars more fuel efficient seems to be going down. Maybe GM should have been thinking ahead instead of fighting everything tooth and nail and then being forced to react.
I personnally would rather keep my money and not give it to either GM or the government, unless they deserved it for doing the right things and running a responsible organization, and that’s sure not the case right now.
CAFE is lousy legislation because it doesn’t directly encourage consumers to change their driving/vehicle purchasing habits. If we really wanted to promote fuel conservation in this country, we would establish a CO2 cap and market – which essentially is what Eurpoe does. Instead, our wussy legislators refuse to do that because the price of gas would greatly increase (and there would be a consumer backlash)…so instead we decide to put the entire burden of improving fuel economy on automakers. Lutz is right, this is unfair – and it’s all because the government lacks the balls to ask the voters to change their habits directly (which, being something of a libertarian, I don’t agree with anyway).
Yeah yeah, and adding close captioning is going to add $30 a set to the price. (yes that was an actual argument, it ummm didn’t)
The product mix will simply change.
Besides it isn’t like it is illegal to build a car that doesn’t get 35 (or rather a car not averaged out by a more efficient car) the company just has to pay some to allow it.
If it is such a big deal GM will just build the pig and have the customer pay the tax which is $55 a vehicle per MPG under spec. So to drop it the 10 or so MPG it needs to it just add $550 to the price and be done with it.
quasimondo: If the only reason you’re willing to let the government dig into your pockets is because you’re a ’shareholder’, that’s a bad reason.
I didn’t see the word “only” in gzuckier’s comment. Regardless, as a “stakeholder” in the big bad federal gub’mint, a citizen does have a say in what leadership gets elected, what policies are enacted, and how the government spends the money it collects from citizens. It’s called “democracy,” and it works pretty well, as long as citizens are engaged and aware of the issues.
About the only course of action for a non-stakeholder to influence GM directly is to not buy their cars. Clearly, the people are taking action.
If the government took all the money wasted on the boondoggles like ethanol and used it to modernize the road system there would be your greatest savings in fuel and pollution. No longer would most major cities have their road system look like a parking lot for hours each day. Of course that would require the government to actually do something instead of just legislate. Not gonna happen soon.
It doesn’t have to be his only reason to be a bad one. In the end, you’re still throwing money into a hole with no appreciable amount of improvement and for no good reason.
If ‘democracy’ was really working well, the approval ratings of Congress and the President wouldn’t be sinking as fast as GM’s sales figures.
kowsnofskia :
January 15th, 2008 at 12:05 pm
CAFE is lousy legislation because it doesn’t directly encourage consumers to change their driving/vehicle purchasing habits. If we really wanted to promote fuel conservation in this country, we would establish a CO2 cap and market – which essentially is what Eurpoe does
Sure, how about a big increase in gas taxes, and a disinvestment in the interstate highway system in favor of intraregional high-speed rail travel. Make it more expensive and less convenient to travel long distance by car and people won’t do it as much, provided alternatives are more convenient and less expensive.
Chances of this happening in the US: 0%. We love our oil culture too much.
As is typical of gummint, the new CAFE standards have done little to eliminate the loopholes that you can drive a Hummer H2 through. Even so, gov’t fiat is usually a bad way to change behaviors.
The most efficient way to increase fleet mileage is with gas prices. As prices go up, consumers would choose to buy vehicles that use less fuel, unless they CHOOSE to buy a gas guzzler and pay the freight. We can already see the effects of $3/gal gas on conumers. If the gov’t enacted higher gas taxes, it would accellerate this change of behavior. No new CAFE rules needed. But, the Congress want to be seen as doing SOMETHING, even if it’s all useless posturing.
The bigger issue is that Detroit should have seen this coming, as all the rest of us have. They continued to plow their resources in to trucks and SUV’s, and all but abandoned their car lines.
Now that gas is through the roof, we’ve got Ford with 4 sedans (Focus, Fusion, Mustang, and Taurus), and 8 SUV’s (Escape, Taurus X, Explorer, Explorer Sport Trac, Expedition, Expedition EL, Flex, and Edge).
Tell me again why I should feel sorry for Detroit?
As we’ve heard before, this is just Detroit caught flat-footed (again) when the game changed. It’s not as if the CAFE changes happened overnight; Congress has been working on this for two years.
Drive up the cost per vehicle $6K? Ummm, no. The carmakers have smaller, more efficient engines available. They have diesels and hybrids.
As usual, it will be the companies that stop whining and start engineering that will win.
I find it interesting that that same people who say “don’t give the inefficient government one red cent” are often the same ones who proudly exclaim “The US is the greatest country in the world”
The US must be a truly amazing country if it was able to accomplish all this wonderfulness despite its terrible government.
Sure Bobs comment makes sense.
No wait, I just looked around and not a goatee in sight, so this is not the backwards universe and Maximum Bob continues to make asinine clue-less comments.
Everywhere else in the world that has efficiency regulations, cars get smaller and more efficient. I don’t see how this increases their price.
Small 4 cyl diesels in small cars will get well over 35mpg. Bobs problem only manifests when you try to make a Yukon go over 20MPG. You can spend $10K and it is still not getting to 30MPG. Technology only does so much when fighting the laws of physics. It takes a lot of energy to move a 5000-6000lb brick. 2000lb egg shapes use much less energy. I predict an evolution where cars lose weight and get mroe aerodynamic. That is really zero cost.
The solution is simple: the TATA “People’s Car!”
Blaming this on Detroit’s SUV lineup is a tired argument that loses it’s relevance when you notice that Toyota has just as many SUV’s (Rav4, 4Runner, Highlander, FJ Cruiser, Land Cruiser, Sequoia, and the coming soon Venza) as Ford.
Eric,
Those ideas are not inconsistent in the least. Did you never listen to Ronald Reagan? The US is the best when it is LEAST hampered by government. It has been the best because it has been the least hampered by government. We have the most just society because people believe our society is just, and I believe that has been because government has been held in check. Unfortunately, Reagan’s efforts are all but undone.
It will be interesting to see if EU meddling can manage to squash the small government revolutions happening in eastern europe.
Frank,
I see the future very differently than Bob Lutz. I think we can have a second birth of the automotive industry that will offer new and very different products to consumers, enticing them to ditch the old and adopt the new.
Instead of spending money on fuel, we can spend money on cars. Isn’t that great for auto makers?
Look at Brazil, where flexfuel vehicles have put the car market on fire (good economic growth helps too, of course).
See, i would be more happy to hand over the money to GM, if I owned a part of GM. since I don’t, I’d rather hand it over to the gummint, since I own a part of the gummint.
If the only reason you’re willing to let the government dig into your pockets is because you’re a ’shareholder’, that’s a bad reason.
The only reason I’m willing to let the gummint dig into my pockets is because they can bring better guns to the table than I can! GM would have to Damn near kill me before I’d give them any of my hard earned money. Well pert near!
Quasimodo,
The problem with your comparison is Toyota makes a lot of cars that more than make up for their SUV’s use of gasoline. GM, Ford, and Chrysler do not.
Where is GM, Ford, or Chrysler’s fully hybrid cars? I can name one – the Escape. Toyota has the Prius, Camry Hybrid, and Highlander Hybrid.
Honda has a Civic Hybrid and used to have two others.
Both manufacturers also have very efficient small and mid-sized sedans. Toyota and Honda invested years ago in the technologies that will see them into the future whereas Detroit has rested on its laurels counting on the truck and SUV boom to carry them.
I don’t want to see the big 3 go under, but the truth of the matter is they have done it to themselves. They allowed their foreign competitors to become better than they are and sales figures are showing that. This is a consumer driven market – people vote with their wallets.
Detroit’s SUV lineup is a tired argument that loses it’s relevance when you notice that Toyota has just as many SUV’s as Ford.
That the FORD/Toyota SUV ratio is near 1 is not what matters.
The Ford/Toyota car ratio is nearer 1/2 or 2/3 and Ford’s cars aren’t selling as well.
Another way of looking at it is that Ford has almost twice as many SUVs as they have Cars but Toyota has a nearly 1/1 ratio for SUVs vs Cars.
It’s not just that Ford made SUVs it’s that they paid less attention to the car side of the business and it shows.
There are Five ford cars if you count the Crown Vic FFV (Fleet only). If you don’t consider the Crown Vic it’s just 4 cars.
Focus
Fusion
Mustang
Taurus
Now the Toyota list is:
Avalon
Camry & Camry Hybrid
Camry Solara & Camry Solara Convertible
Corolla
Matrix
Prius
Yaris
I’d count Camry and Camry Hybrid as the same car and I wouldn’t argue too much if you called the Solara part of that unit as well. So what is the count for Toyota would you call that 6 cars or 7 cars?
They’ve paid less attention because they have four models compared to Toyota’s six(seven)?
Would you say this about Honda because they also only have four passenger vehicles in their lineup?
Ford has one vehicle each for the compact, midsize, and full size car market, and one sports ccar. How many more vehicles do they really need?
Landcrusher,
I will simply refer to Stephen Colbert in response to your last post:
“I believe that the government that governs best is the government that governs least….and by these standards we have set up a fabulous government in Iraq”
Note: This does NOT mean that I think the CAFE standards are smart policy. OTOH, I think Lutz is “Crying Wolf” one more time.
It will NOT cost $6k per vehicle to reduce engine displacement 10%, raise final-drive ratios 10%, improve aerodynamics 10% and reduce weight 5%.
It may mean that our vehicles are a little slower, a bit smaller and won’t have the latest USB-compatible vibrating cupholders, but we’ll be OK.
Is this all supposed to add up to a 35% increase? If only we could all be like Capt. Jean-luc Picard, getting things done by just saying, “make it so,” but alas, this isn’t Star Trek. Some things do require a significant investment, otherwise we end up the kind of jury-rigging that’s the old Saturn Vue Greenline.
I doubt the 35% increase will actually happen. There are too many glaring loopholes – like credits for selling a flex-fuel vehicle. And if the cost ever does start to sting, or the price of oil drops (and consumers demand thirster/more powerful vehicles) future congresses will change the law.
Quasimondo:
Two of the changes I proposed (smaller displacements, taller final drive ratios) are nearly a “make it so” proposition. The aerodynamics and weight reductions will take longer, but the automakers don’t have to meet the new standards until 2020.
Speaking of the Saturn Vue Green Line, the idea of making engine idle shutdown standard for all cars is a good one. That would be about a 10% fuel economy gain with just that one change.
Also, the 35 mpg number is a bit misleading. That’s the CAFE number, not the EPA window sticker number. CAFE numbers are roughly 20% better than EPA numbers, so meeting a 35 mpg CAFE number is about equivalent to meeting a 26 mpg EPA number (55% City/45% highway).
https://www.thetruthaboutcars.com/editorials/the-truth-about-epa-mileage-estimates/
Does the new CAFE change the ultimate loophole… just paying a $55 fine for each MPG under the standard? That’s what most German car companies do here. A 15 MPG vehicle only has to pay $1100 to make up for the deficiency fro 35 MPG. That sounds a whole lot cheaper than the $6k figure Bob gives.
Would consumers pay a 1-time charge of $1100 for their 15 MPG vehicle? Sure thing. They already pay about $3k EACH YEAR just for fuel.
Eric,
You implied that people who were anti government and pro US were somehow inconsistent. I responded and showed that they are not.
You then bring in some sarcasm from Colbert? It was funny when he said it, but not when you quoted it. Why? Because quoting here makes no sense.
You are correct about 35, but you are way off on this one. The people advocating larger government are almost always wanting to change something that is fundamental to our country. It is THEY who are anti US. The smaller government types are usually advocating a change in the government to keep it FROM changing the country.
Drop the humor. It is confusing your logic. A humorous line is often funny because it SOUNDS logical, while NOT BEING logical.
I want to refer you all back to my comments in a previous thread about Zoom.
Lutz is assuming that they have to keep making cars with more and more stuff and HP in order to sell them. That will likely be expensive to do with higher mileage.
OTOH, how many people would buy a 220 hp car over a 180hp car if the latter “felt” just as fast, but was much cheaper? The less powerful car will win because very few people actually pull out a stop watch to evaluate a car.
If when a car is accelerating it feels confident and strong, people will buy it. Even if it is a couple seconds slower to 60 on the watch. We don’t all compare 0-60 times, but we do compare the feeling (including sounds) we get when we “punch it”.
To Landcrusher: So who ever advocates larger government? If you see every necessary regulation as government interference we are talking about a current fad: being a libertarian. Which is about as feasible in the real world as it’s mirror image opposite communism. Both are fantasy ideals that quickly fall apart when any thinking is done.
In the real world all governments tax and regulate. The trick is finding the appropriate balance.
The anti-regulation folks really need to spend some time in downtown Calcutta to get a good whiff of what unregulated emissions smell like.
Cafe is a farce. It is the weak kneed approach that does next to nothing. As pointed out. That 35MPG is based on old unrealistic numbers so already that is phony number and they get credits for E85 compatibility which is more life support for the ethanol boondoggle.
The real solution would be fuel taxes, but no one has the stones for that. And no this is not a cash grab by government, fuel taxes should be directly applied to maintaining the highway infrastructure. All the better that more of the expensive highway system come from fuel taxes and less from personal income taxes.
Cafe will be irrelevant by that time 35mpg kicks in because rising fuel prices will drive us to smaller cars anyway.
Bottom line though is that Bob is still completely out to lunch. When he makes bonehead statements like this he greatly diminishes belief in anything that comes from GM. GM with maximum Bob are building a new reputation for BS.
Bytor,
If you think that I, or even most libertarians, advocate no emmissions regulations, you are incorrect.
Lot’s of us here agree on fuel taxes and that CAFE is lame, but that doesn’t get us from our A to your B.